Scandinavian Working Papers in Economics

Ratio Working Papers,
The Ratio Institute

No 327: Asymmetric Double Pareto Distributions: Maximum Likelihood Estimation with Application to the Growth Rate Distribution of Firms.

Daniel Halvarsson ()
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Daniel Halvarsson: The Ratio Institute, Postal: The Ratio Institute, P.O. Box 5095, SE-102 42 Stockholm, Sweden

Abstract: This paper considers a flexible class of asymmetric double Pareto distributions (ADP) that allows for skewness and asymmetric heavy tails. The inference problem is examined for maximum likelihood. Consistency is proven for the general case when all parameters are unknown. After deriving the Fisher information matrix, asymptotic normality and efficiency are established for a restricted model with the location parameter known. The asymptotic properties of the estimators are then examined using Monte Carlo simulations. To assess its goodness of fit, the ADP is applied to companies’ growth rates, for which it is unequivocally favored over competing models

Keywords: Distribution Theory; Double Pareto Distribution; Maximum Likelihood; Firm Growth

JEL-codes: C16; C46

38 pages, December 18, 2019

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